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Is the HSC not round the corner? Concentrate on getting through that mate. Wished I started in the game when I was 18 too but glad I had a “normal” uni life. A good job with escalating pay rises year on year only helps the serviceability and by then you will know not to blow it all on fine wine, women and WRXs. Only started 3 years ago but all you need is one cycle.
Headline inflation is running close to 4% pa now but in reality its something like 10% when you add other cost of living items like rent and mortgage payments which Bureau of Stats refuse to include to keep inflation artificially low. So your real return is actually negative IMO. But still better than sticking it under your pillow.
Domestic and offshore financial markets are so whippy at the moment with no clear direction and resi IPs aren’t excatly booming either.
So my advice and would love ASIC to pick me up for this is to take a round the world holiday and live a little!
Nice one Simon, hadn’t thought of that strategy of selling to trust but I’ll need to pay CGT on the sale side too won’t I? I suppose what you are doing is crystalising the profits but keeping the IP in the “family” so to speak with associated stamp duty costs. My strategy of releasing equity from IPs was to use LOC to pay interest & IP costs then slowly accumulate rents in a separate a/c for tax purposes. Slow I know but if you have a few IPs, can easily “release” $100k a year.
Unfortunately its the opposite. The bottom end was filled with investors and these are the guys who can’t afford to hold. That unit purchased in Cabramatta for $235k in 03 and picked up by agent for $90k @ m’gee sale recently is prime example. No offence to SW Sydsiders but I sure wouldn’t want to live out there if I had the choice. We lived in Cabramatta for 9mths and every night all we could hear was police sirens going off constantly and there were gun shots every 2nd night. Admittedly this was nearly 15 years ago but memories are still very vivid.
There are numerous stories of homes bought in Blacktown and Mt Druitt areas for the mid $300k mark back in the height now struggling to sell for mmid to high $200s. These older fibro places wouldn’t rent for more than low $200 mark. A cabbie told me how he had to sell for a fairly large loss as he couldn’t afford the mortgage repayments and similar stories with his mates. He said he doesn’t understand why its so cheap. Simple – no one wants to live out there and so only investors bid frenzily over each other in utter madness during our boom.
I wonder if areas such as Orelia, Kwinana, Rocko, Leda will experience similar “hurt” when the market cools over in WA.
Is this as an IP PPOR? Yields are still very low though. You guys talking about the old areas? Booker Bay, Umina, Woy Woy or Terrigal, Avoca way? Or up the Entrance? A lot of land subdivisions west of F3, not sure what that does for future land values….
So theres an article in today’s SMH about m’gee sales being twice the amount during Keating’s 17% interest rate era and affordability index in Syd being still at 37% (30% the avg), with Syd at 20% back in 1997. Hence Ryder and Jenman advises that now is not the time to buy in Eastern Seaboard. Yes we all know that – there was the St Clare story and then the Annandale one was the main story today. Traded $750k+ 2 yrs ago and no bid at $550k with one ridiculous offer at $330k.
Extreme examples I know but wonder if its a pre-cursor of things to come from current WA boom?? Syd is proof that it can happen, prices WILL go down. Wonder what will happen to the WA market when all these new homes are constructed in 12mths time? We’ve already seen many tenants on short term leases only to vacate when their homes are constructed. And just the other day I saw a heap of advertisements for H&L packages in Perth here in a Syd RE window. Looks like the spruikers are still out there however have replaced Gold Coast high rises with middle of nowhere private sub-divisions on very ordinary homes. Similarly up north, we are also seeing the lagged effect of an oversupply of newly constructed homes in greater Brissy. Cairns is also going through this phenomena at the moment with herd like investors building like theres no tomorrow in the previous cane fields of Edmonton and Gordonvale.
I find this activity very reminiscent of the private equity firms offloading their stock at the peak of the tech booms. The winners: banks, brokers and venture capitalists. The losers: us!
Might be time to put our WA portfolio on the market…
I think its more like the other way round. Eastern staters having a “we” and WA mentality of “who wants to live there”. Well this resources boom have firmly put them on the map. How many times does the media throw in WA or Perth when they talk about housing. When I started buying, they were still reporting on what 80% of sheeps were doing – providing reasons why Eastern Stater’s fall will be soft and keep extending their projections of a recovery. So now they are saying its all over. Who writes this crap?
If anyones been looking in Syd recently, you still can’t buy a decent piece of dirt for under $600k within 15km of CBD or 5km of beach. Terraces in Paddo are still askin $1M+ with <300m2 land. Balmain and Glebe aren’t any better. Forget the eastern suburbs, East side on the north shore or even Strathfield. NSW yearly growth 0.1%, WA is 12% and Qld 7%. And the median price of Perth is still only $400k. Better buy some more.
For you Perthites, what do you think of Guildford Grammar? Heard its one of the most exclusive provate schools over there. But not many people live in good ole Guildford do they? A lot older homes and yeah theres the airport just South of Guildford. Is the airport noise actually that bad?
Probably posting the wrong question here on a +ve CF site but I really don’t mind a few $500k trades go through down that area. These darn WA valuers just can’t seem to keep up….
Probably need a couple more zeroes behind it I’d say. Haven’t checked in here for a while but looks like theres a few newbies come on in search of the holy +’ve CF grail but only to be enviously mesmerised by Dazz’s C/IP posts. How about throwing these guys a bone Dazz? I’m sure theres enough willing $300k participants to get a syndicate together and have a crack at even your sub 6% discards in this environment?Lots of money was there to be made in the Syd/Melb cycle from 99-03, Brissy followed and then obviously now seeing a maturing/ed Perth & Darwin so $100k from one property is actually quite the norm if ur on the right side of the trade. However going forward is a totally different story. Everything is so exxy right now. Not even sure if the experts are looking in Oz for +ve CF IPs. Even the yields in Texas and Arkansas have been crushed considerable in the last 2 years. These T3 receipts is looking rather attractive at the moment with no risk of a hot water system blowing up.
Do you already have titles? If so, why won’t you flick em and move on to another deal? People are paying a premium for titled blocks ATM. Bear in mind that most new estates in WA at the moment have plenty of blocks that are held by investors with much paper profits. Will they be able to settle and hold should the market take a turn? 3 years ago, who would have thought by only putting $1K deposit down you can settle in 12 months time and make a killing such as what you have done. Wow, its easy isn’t it? However this is not the norm but the exception. A lot of newbies in WA could be caught up in the hype. Do they know the ramifications of putting down cash offers just to secure the block in hope that the market continues to rally and another woodduck will be round the corner to buy it off em? I am aware of one individual whos interested in doing a deal as he has the land but can’t access the equity as titles aren’t out yet. I doubt he will be in a position to settle either. He might do OK as he bought into earlier stages.
Not many people can afford to fund the monthly cash flow on $200k empty blocks of dirt. Once Dola gets their act together and imagine if you had to settle 3 or 4 of them and no one could? Thus putting them all back on the market.. all at once? I hear recent stage releases have over 50% investors lining up. EOIs are taken in the name of their mum, dad, spouses, kids, dogs….
If you built, it will take 12 months and you will only receive about $280 per week rent. Even then it will be around $220k turn key.
However the momentum is still there in WA ATM and will continue for the rest of the year but it certainly will be interesting times when cab drivers and every man on the street is now a property investor, sorry I meant land speculator.
Good luck mate.
I’ve been searching high and low for decent titled blocks. Those selling for < and low $100s just 18 mths ago are now well into the mid $200s. And a complete turn key 4×2 with most basic builder costs min $200k. So its $450k+ in a decent estate incl stamps and holding costs. Will it be worth $550k in 18mths time? or will it below replacement cost as are some estates out East? Interested to find out if anyone is signing up for anymore H&Ls with minimum 12mths to completion. Who knows where commodity prices will be by then?
Where is it and what do you want for it? Obviously the agent already has a sign up? Sack em and you can then put your own up for $100. If you haven’t had any hits through re.com already, then unlikely to. Local ads don’t really help either if locals don’t want it. Perhaps a select target market? Like o/s expats or interstate newspapers? Have a look through London and HK sites. There are heaps of bankers in Asia at the moment desperate to spend their easily earned USD. Good luck!
Is there a boom going on in WA?? I must have missed the boat.
Its a tough one indeed. Should commodity prices take more of a freefall and oil follows, the logical step is for easing of monetary cycle as inflationary pressures will be alleviated. The govt will not tolerate any sign of depression so wll use interest rates to shore things up pretty quickly. The Boards are all very quick to act these days. This pull back is very healthy for the market thats run in excess of 20%+ returns for over 3 years now. I’m certainly not discounting the miners to keep rallying. BHP @ $25.00 is a steal.
Sept Futures were implying a yield of 6% this morning. Clearly thats been over sold. The banks could only hold the low rates for so long seeing how the curve has steepened significantly in the last month. Hence Hompath’s 6.39% “special” for the 2 – 5 year rates have now increased 20bps. Most Economists still think we’re not going to see a rate hike next month until further data in the coming months confirm a rate hike is warranted. Either way, this tightening cycle (if at all) is not going to be more than 50bps. Stay variable folks.
I too have been shown a deal like this before but turned it down. To me the area did not have a great potential for growth and the rent return post lease was going to be halved. Bear in mind most of these estates will be new and may take a while to get filled in. Check out some posts about buying into new estates and margins in H&L deals. At least you don’t have any headaches with the finishes and selecting colour schemes. But thats not to say these type of deals won’t work for you. Like all OTP purchases, they are awesome in a booming market.
From these discussions, I think you guys have pretty much hit the nail on the head – it is a cost to doing business. You can diversify as much as you want but it will always come and bit you in the bum if you want to be a serious investor. Setting separate DTs or HDTs will create a separate structure but VIC and NSW OSRs are already on to that and Qld has a different threshold. States will change rules all the time. Notice how rules will change when income from other sources dries up. ie. Valuer General starts increasing NSW land values by 100% in 2 years in a soft market when Iemma and his croonies fail to recoop transfer duties and vendor exit5 duties. Unfortunately state govts will always need to pay for their worthless bureaucrats and pension funds hence we the hard workers will pay for it through indirect taxes like payrolls, transfer, mortgage, lease duties and land taxes.
I believe in WA you can set up different structures like 99/1, 98/2 title ownerships and that will give you a new threshold everytime however other states will just aggregate it. Again rules may change. But when you do that the banks will want all parties on the loan doc (joint & severally) & that itself will chew up DSRs on each party.
If you put it into a HDT, you have $2K trust set up, $2K trustee co. rego plus setup and upto $600 p/yr accountant fees & co. returns. And you pay higher rates.
NSW is looking to change the calcs though by averaging the UCV over the last 3 years. Incidently this is already being done in Qld so all you guys who think you currently have a great threshold at $400K+, wait for a couple more years. I’ve seen some massive jumps in UCVs in the inner Brissy region over the last year or so. Perhaps Beatties hoarding for another cyclone….
Unfortunately thresholds do not increase faster than artificially determined UCVs. The $350K or so threshold in NSW is just an absolute joke. It precludes any dirt ownership within 10km of Syd CBD. Friggin thieves!!
Are you using an agent? Depending on the covenant (some developments prohibit you from selling), you can just go get a sign done up and whack it on there. People driving around will see it more so than advertising in Domain or local papers..etc.. Or you could put a cheap 4×2 on it then rent out so it won’t cost you so much in repayments. If you think you can’t fund the construction loan, speak to a broker on this site. Banks are throwing money at you these days. Good luck.
